HIGHER YEARNING

INVESTORS WANT WESTERN INTERNATIONAL UNIVERSITY TO CASH IN ON THE MBA CRAZE. BUT THE SCHOOL HAS YET TO MASTER ITS OWN BUSINESS PROBLEMS

The cars seem remarkably new for a university parking lot. There are no bikes or beaters, no VW buses with bumper stickers that read "Honk if something falls off." These are shiny Tauruses and Sentras, the sensible cars of people with jobs.

The cars' owners are middle-aged middle managers, white-collar working stiffs earning bachelor and master degrees at night at Western International University in west Phoenix. Many of them come to class still wearing the skirts and ties of their workaday uniforms.

Working adults represent the fastest-growing segment of American college students. They want degrees--especially business degrees--so they can better their employment, and often, they have been sent and supported by the companies they work for. In fact, U.S. corporations spend about $40 billion per year on employee tuition, money they hope will prove to be more of an investment than a perquisite. And so both employer and employee are more concerned with pragmatism than prestige. Adult education, meanwhile, has become a growth industry.

Western International has catered to that market niche since 1978, but never with the success of such educational neighbors as the University of Phoenix, which claimed gross revenues this year in excess of $90 million. On the contrary: WIU, despite its accreditation, despite its respectable academic programs, has been plagued by bad financial decisions--which in the world of business schooling could instill as much confidence as a barber with a bad haircut. And though the Phoenix business community has not seemed to notice WIU's fiscal problems, the U.S. Department of Education has. In 1994, the year WIU started to turn a profit, the DOE demanded the university post a letter of credit to continue to participate in federal student loan programs.

Losing federal student aid "wouldn't have immediately put the school out of business, but it would have put us at great risk," says university president and board member Jim Haynes.

Unable to come up with the cash needed to satisfy the government, Haynes worked the old-boy network he'd cultivated in 15 years as president of the Phoenix Chamber of Commerce. He found a group of investors to buy the university and convert it from a nonprofit to a proprietary, for-profit institution.

The investment group includes Haynes.
Haynes claims his first priority is to keep the school open, insisting that he is staying out of the dealing process and that he will resign if anyone cries "conflict of interest."

Even so, his positions on the boards of both the buying and selling corporations certainly raise questions. And it may only be coincidence, but half of the expected sale price of the university would be paid back to the new owners in an accounting maneuver that involves previously paid student tuition.

Less than a week after WIU announced the pending sale, the university was hit by a court judgment demanding more than $4 million, money the school doesn't have, more money than it is worth. Both sides still think the sale will go through, though how is anyone's guess. Why would anyone want to buy a failing little school in the first place?

Because business is business, and the business of business schools is booming. Everyone wants or needs an MBA these days. Why shouldn't little Western International University get its share of the revenues generated by the MBAstardization of America? The market is out there. Can a group of savvy businessmen at the helm of WIU get at it more successfully than a succession of educators could?

WIU has about 2,000 students, and slightly more than twice that number of alumni, a scant showing for its 17 years of existence. Most of the current students are 35 to 45 years old. About 20 percent of the student body comes from abroad, especially from Asia, and many of the rest of the students come from Valley corporations, notably Intel, Motorola, and McDonnell Douglas Helicopter Systems, all of which have WIU courses taught on their own premises. The university was started in 1978, funded by World Universities, Inc., a Puerto Rico-based foundation intent on fostering continuing education for adults in the United States and Latin America and funded partly by donations from such philanthropists as Albert Schweitzer and Pablo Casals. WIU was the fifth World Universities project, and the only one still operating. Ronald Bauer, the head of World Universities, named himself president of WIU and sent his son Logan Bauer and a prot‚g‚, Robert Webber, from Puerto Rico to handle the day-to-day management. (None of them returned calls from New Times.)

The school operated in the red for nine years; though it finally posted revenues greater than liabilities in 1987, it was plagued by the kind of nickel-and-dime lawsuits from suppliers that are symptomatic of bad business and worse cash flow. By 1983, World Universities had pumped more than $4 million into WIU, and whether that money constituted a loan or an endowment is a question of dispute today.

"Both World Universities and WIU passed board resolutions that made it clear that this was an injection of funds and not a loan," says John Blair, who currently heads WIU's board of directors. According to Blair, the agreement cleared WIU's books so that they would pass muster with the North Central Association of Colleges and Schools, which granted accreditation to WIU in 1984. "Otherwise, we would not have been accredited," Blair continues.